Financial Statements Notes to the Financial Statements 35. FINANCIAL INSTRUMENTS (continued) (vi) Market risk (continued) (b) Interest rate risk (continued) Managing interest rate benchmark reform and associated risks Overview A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank offered rates (IBORs) with alternative nearly risk-free rates (referred to as “interest rate benchmark reform”). The Group has exposures to IBORs on its financial instruments that will be replaced or reformed as part of these market-wide initiatives. The Group anticipates that interest rate benchmark reform will impact its existing risk management practice and application of hedge accounting. The Group evaluates the extent to which contracts reference IBOR cash flows, whether such contracts will need to be amended as a result of interest rate benchmark reform and how to manage communication about interest rate benchmark reform with counterparties. Hedge accounting During the year, where hedge accounting is applied, the Group has completed the supplementary loan agreement for the bank loans and trade confirmation amendment for the derivatives instrument (hedged items) impacted by the interest rate benchmark reform with the respective counterparties at no increase in loan interest. The interest-bearing loans and derivatives (hedging instruments) had been transited on the same date and to the same benchmark indexes to avoid any ineffectiveness in relation to the application of the hedge accounting. Therefore, there is no longer uncertainty about when and how replacement may occur with respect to the relevant hedged items and hedging instruments. As a result, the Group no longer applies the amendments to MFRS 9 issued in September 2019 (Phase 1) to those hedging relationships. (vii) Material hedging activities Hedge of net investments in foreign operations The Group borrows loans denominated in Japanese Yen (“JPY”) and utilised cross currency interest rate swaps to realign the Singapore dollar denominated loan back into effective JPY denominated loan to maintain a natural hedge for its JPY denominated investments. The amounts related to items designated as hedging instruments were as follows: Nominal amount Carrying amount Line item in the statement of financial position where the hedging instrument is included Changes in the value of the hedging instrument recognised in OCI Assets Liabilities Foreign currency risk RM’000 RM’000 RM’000 RM’000 2023 Foreign currency denominated loans and borrowings 2,394,608 – (2,388,177) Loans and borrowings 198,273 2022 Foreign currency denominated loans and borrowings 2,290,792 – (2,283,578) Loans and borrowings 313,681 IHH Healthcare Berhad 218
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